Pendragon posts record profits but warns over impact of Ukraine conflict

Car dealership Pendragon reported record full-year profits on Wednesday but cautioned over the impact of the Ukraine conflict on supply and costs.

In the year to the end of December 2021, underlying pre-tax profit rose 912% to a record £83m, with revenues up 18% to £3.4bn. On a like-for-like basis, revenue was 27.1% higher on the year.

Chief executive Bill Berman said there had been positive contributions from all parts of the business. He also said the company's upgrade of its digital capabilities throughout the year meant it was able to fulfil demand through a combination of full store experiences, home delivery options and click and collect.

"Late in 2020, we set out our new strategy to transform our operations and adapt to the fast-changing retail environment. Our focus since then has been on creating value through the delivery of this strategy and we are seeing the operational and financial benefits of this hard work in our results today," he said.

"Our sector has experienced a unique set of trading conditions during the period and I am delighted with how we have performed in this environment. We have made the most of the favourable market dynamics to deliver record underlying profits and we have also reported a return to profit for CarStore, our relaunched, used car brand.

"We expect existing supply chain constraints to continue in the current year, and we are mindful of the potential for further disruption to new vehicle supply chains as a result of the conflict in Ukraine. Despite this, we have the right strategy in place and we expect to make positive progress towards our long-term goals this year."

Pendragon said its performance over the first two months of FY22 has been good, with underlying profit ahead of 2021. Supply constraints in both new and used cars have continued to support higher gross margins, it said.

Both new and used margins are expected to reduce during the course of this year "from extraordinary levels achieved in 2021".

The company did not comment on a Sky News story from earlier in the week which suggested that it had rejected a secret £400m takeover approach from its largest shareholder, The Hedin Group.

Pendragon operates the Evans Halshaw and Stratstone brands.

Berenberg, which rates the stock at 'buy', said the results were a touch ahead of the guidance provided by the company a month prior to year-end.

"FY22 has also started well, and while the group has not provided FY22 guidance, ongoing margin support from supply chain constraints, alongside increasing confidence in the delivery of underlying improvements, leads us to increase our EBIT estimates by 16%/15% in FY22/23 respectively, and our price target to 36p (from 30p)."

The bank said also lifted its FY22 adjusted pre-tax profit forecast to £56m from £43m.